NDX futures lagged in the overnight session until 6:00 am, when it began to surge to a new futures high, just in time for Index options expiration at the open. Open interest in index calls at 14000.00 is 691 contracts. Open interest in 14000.00 puts is 120 contracts. Open interest falls off dramatically in either direction for both puts and calls. It appears that big money has a lot hanging on the NDX 14000.00.
As most readers should be well aware, one of the things I monitor most closely is insider buying and selling. Nobody knows more about the bullish and bearish developments of a business and its valuation relative to those developments than the company’s top executives. Now some believe that, while insider activity may sometimes be a good indication of future price movements in individual stocks, in aggregate it doesn’t have any meaning at all. In addition, many suggest that, while insider buying may be predictive at times, insider selling is not. Both of these positions, however, are contradicted by the data.
As Nejat Seyhun, Professor of Finance at the University of Michigan, has demonstrated in his book, Investment Intelligence From Insider Trading, the aggregate selling-to-buying ratio over certain periods of time has a very good track record at predicting future returns in the stock market. In his words, “Aggregate insider trading predicts aggregate stock returns.” Furthermore, “Aggregate insider trading predicts changes in future economic growth up to two years ahead.” So not only are insiders better market strategists than those on Wall Street, they are also better economists.
The NDX Hi-Lo Index shows a a singular lack of interest as only about 4.25% of NASDAQ stocks are making new 52-week highs as of yesterday. Point 6 was made in March and it appears that the NASDAQ is on the verge of a sell-off. A NASDAQ sell signal is made below 0.00. It doesn’t have far to fall.
SPX futures are making a new all-time high at 4168.38 as of 7:52 am. There is open interest of 11003 contracts for the 4150 calls, 7500 contracts for the 4175 calls and 13178 contracts for the 4200 calls this morning. There are 7903 put contracts at 4150, but it drops off to 154 put contracts at 4175. All of these contracts expire at the open.
ZeroHedge reports, “US equity futures and global stocks rose to new record highs and oil climbed after strong U.S. and Chinese economic data bolstered expectations of a solid global recovery from the covid pandemic. At 7:00 a.m. ET, Dow e-minis were up 34 points, or 0.1%, S&P 500 e-minis were up 5 points, or 0.11% to a new all time high of 4,167, and Nasdaq 100 e-minis erased a decline of as much as 0.4% to trade little changed as of 7:20am in New York.
The benchmark S&P 500 and the blue-chip Dow are on course for their fourth straight week of gains, while the Nasdaq is less than a percent below its own all-time peak despite some turbulence last month. With the first-quarter corporate earnings season under way, focus will be on results from Morgan Stanley after bumper earnings earlier this week from JPMorgan, Goldman and Bank of America that reinforced hopes of a swift economic rebound. Oil companies, mainly Chevron Corp, Marathon Petroleum, Exxon Mobil Corp and Occidental Petroleum, gained between 0.3% and 1.1% as oil prices rose.”
VIX futures dove to 16.30 this morning as the options expiration surge is underway. Options expiration occurred on Wednesday for the VIX, although ETF options do expire today. At 8:00 am VIX bounced and appears that it may opend in positive territory.
Banks’ earnings season has not given the BKX a boost needed to finish the Master Cycle at a new all-time high. Today is day 248 in the Master Cycle. Further erosion may cross the Ending Diagonal support line and 50-day Moving Average at 120.31, giving it an early ending. This may also put an end to the liquidity surge evident since last September.
ZeroHedge rpeorts, “Bank earnings season concluded as usual with Morgan Stanley reporting record earnings that smashed on the top and bottom line, but as with other banks the stock dropped for two reasons: i) MS was, naturally, priced to perfection and ii) it reported an unexpected $911 million loss tied to the collapse of Archegos which marred an otherwise pristine quarter.
First, the big picture:
- Q1 EPS $2.19, Exp. 1.70 and up from 1.01; tax rate was 22% up from 17.1% a year ago.
- Q1 Revenue 15.7BN, above the exp. 14.09BN.
- Investment Banking Revenue: 2.61bln (exp. 2.01bln)
- Wealth Management Revenue: 5.96bln (exp. 5.72bln) “brought in flows of 10bln”
- Net Interest Income (NII): 2.03bln (exp. 1.51bln)
- CET1 Ratio: 16.8% (exp. 17.48%)”
TNX appears to have reversed higher after yesterday’s Master Cycle low on day 252. A buy signal is given above Intermediate-term resistance at 16.19. Once it breaks free from its Cycle Top at 17.08, it may progress to its next resistance level at 19.71.
ZeroHedge observes, “Amid the worst quarter for Treasuries since 1980, there was at least one big buyer.
For the 4th straight month, China bought US Treasuries in February (the latest period for which we now have data). That is the biggest holding since July 2019 and the longest buying streak since 2017.
But overall, foreigners were net sellers of Treasuries in Feb, dumping $65.5bn.”
USD futures appear to have reversed at the 50-day moving Average at 91.55 yesterday on day 258 of its Master Cycle. The next move appears to be another attempt at the Cycle Top resistance at 94.83 or the Broadening Wedge trendline at 96.00.